UK mortgage debt shrinks again

The Bank of England has published new figures indicating that during the third quarter of 2009, UK homeowners paid around £4.9 billion off their combined mortgage debt.

Over the past six months, the credit crisis, recession, fear of negative equity and low savings rates have prompted mortgage borrowers to raise their stakes in their homes.

However, the rate at which this is being achieved slowed for the third consecutive quarter in the three months to the end of September.

The latest figure compares with just over £7 billion in the first quarter of 2009, and £6.9 billion in quarter two.

In terms of post-tax income, the proportion repaid has declined from 2.8% (Q1) to 2% (Q3).

Prior to the credit crisis, Britons tended to use their homes as banks by withdrawing cash when remortgaging to spend on everything from home improvements to life’s “champagne moments”.

Equity withdrawal peaked way back in 2003 when average mortgage interest rates were below 4% but was still significantly supporting consumer spending as the credit crisis hit.

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